BAHRAIN Law and Practice Contributed by: Rad El Treki, Noor Al Rayes, Aayush Kainya and Mohamed Al Sari, Al Tamimi & Co.
“any and all actions necessary” to secure clearance from the CPA or the MOI, which may include litigating against a prohibition or agreeing to divest key local assets. 7.3 Risk Allocation Mechanisms Regulatory and litigation risks are primarily allocated through a combination of financial penalties, struc - tural commitments and price-bridging mechanisms. To address the risk of a deal being blocked by the CPA or failing MOI security clearance, parties may negoti - ate reverse break fees (RBFs), which in the 2026 mar - ket typically range from 3% to 6% of the transaction value, serving as the buyer’s “option fee” to walk away if approvals are denied. Ticking fees are also increasingly used to compensate sellers for the time value of money and business ero- sion during protracted regulatory reviews, often add - ing a daily or monthly premium to the purchase price once the long-stop date is exceeded. For litigation risks – such as successor liability for pending labour or environmental disputes – buyers often demand specific indemnities or escrow hold-backs rather than simple price adjustments, ensuring a dedicated fund is available to cover potential court awards. Further - more, where a deal poses a dominant position risk (exceeding the 40% threshold), the risk is shifted to the buyer through divestiture obligations, which define the specific “perimeter” of assets the buyer must be willing to sell to satisfy the CPA. 7.4 Interim Operating Covenants and Gun- Jumping Risk Interim operating covenants are structured to preserve the target’s value during the suspensory period while strictly prohibiting the premature transfer of decisive influence or beneficial ownership, which constitutes gun-jumping under Law No 31 of 2018. To balance these needs, agreements typically employ “ordinary course” covenants that allow the seller to manage day-to-day operations independently, while granting the buyer narrow consent rights only for extraordinary actions such as major capital expenditures, disposal of material assets or changes to senior management. To facilitate legitimate integration planning without violating antitrust standstill obligations, parties uti -
lise “clean team” arrangements, where competitively sensitive information (CSI) – such as future pricing, customer-specific margins or detailed R&D pipelines – is shared only with non-operational personnel or external advisors who are not involved in the buyer’s daily commercial decisions. 7.5 Multi-Jurisdictional and Multi-Regulator Co-Ordination Co-ordinating multi-jurisdictional reviews in 2026 creates “procedural whiplash”, where a single deal faces diverging timelines – such as the CBB’s 60-day clock running alongside the EU’s Phase II or the US Hart-Scott-Rodino (HSR) waiting periods. The primary issue is the risk of remedy friction, where one regula - tor (eg, the Bahraini CPA) demands a behavioural fix like “local data residency”, while another (eg, the UK CMA) mandates a structural divestiture of that same global business line. To address these inconsistencies, transaction docu - mentation now frequently utilise “regulatory hierarchy” clauses, which pre-agree which jurisdiction’s demands take precedence if remedies become mutually exclu - sive, and “remedy scoping” language that defines a “material adverse effect on the deal’s synergies should certain assets be carved out. Furthermore, as with most major/sophisticated juris - dictions, modern SPAs drafted for Bahrain include co-operation covenants that mandate a unified global strategy led by the buyer, ensuring that filings in Bah - rain’s Sijilat system are synchronised with internation - al stop-the-clock events to prevent a “closing gap”, where the deal is legally completed in one territory but blocked in another.
8. M&A Litigation and Disputes – Substantive Deal Issues
8.1 Frequency and Types of M&A Litigation In Bahrain, formal litigation specifically arising from M&A deals remains relatively rare compared to other major financial hubs, as parties predominantly favour private settlement or international arbitration via the Bahrain Chamber for Dispute Resolution (BCDR) to maintain confidentiality and speed.
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